Wednesday, 6 June 2012

The Chartered Institute of Stockbrokers (CIS) is still pushing for
the establishment of a stabilization fund for the nation capital market as a
way out of the downturn that has lasted over four years. A senior council
member of the CISdisclosed
thisin an interview with THISDAY last
Monday, saying the forbearance being planned by the Federal Government would
not solve the liquidity problem in the market.

The Coordinating Minister of the Economy and Finance Minister, Dr.
Ngozi Okonjo-Iweala, had last week reiterated the Federal Government plan to
work out a forbearance package for stockbrokers as part of measures to
stimulate confidence in the Nigerian stock market and increase liquidity.
Okonjo-Iweala gave the assurance atthe
annual meetings of the African Development Bank (AFDB) in Arusha, Tanzania.

But the leading stockbroker explained that while
the move by the government was a good development, he saidit did notmean debt forgiveness. “Debt forbearance does not mean debt forgiveness. It
only allows the debtor to negotiate with the creditor so that they couldagree on the repayment terms. I believe
some brokers are already enjoying forbearance despite the fact the government
has not formally unveiled its package. What the market really needs is a
Stabilization Fund that would ensure direct injection of funds into the market,” the broker said.

The outgoing President of
CIS, Mr. Mike Itegboje, had last March restated the need for a stabilization
fund, saying that would
bring back the much needed investor confidence into the market. According to
him,the fund would go a longin addressing the margin loans
overhang, which had been posing
a huge challenge to brokers. He had noted that since the global meltdown, some
countries had made use of such funds to cushion the effect of the meltdown on
the market.

“We as stockbrokers are again renewing our call for
a stabilization fund for our market. This fund is very necessary as it would
help to mitigate the losses incurred by investors and stockbrokers in the
capital market in the last few years. And so, we want the federal government to
look into this issue as many countries have taken the route of this fund for
their market and Nigerian should not be an exception.” Itegboje suggested that the Asset Management
Corporation of Nigeria (AMCON) could take up the challenge of ensuring that
such funds were properly used in the market.

The Securities and Exchange Commission (SEC) has restated its
commitment to the protection of investors in the Nigerian capital market, saying
its current efforts are geared towards the building of a market that is
transparent and efficient. The Executive Commissioner, Operations, SEC, Ms.
Daisy Ekineh, stated this at an investor conference organised by the Association of Assets
Custodians of Nigeria in London last month.

In a paper delivered on her behalf byDirector, Research and Planning, SEC,
Mrs. Bibiana Okoroafor, Ekineh said the commission was also collaboratingand engaging with fellow regulators and
supervisors to build a stable financial system through information sharing and
capacity building. According to her, the apex regulator of the Nigerian capital
market has embarked on several reforms that would transform the market.

“The continuous and faithful implementation of the
forgoing will lead us to building a world class
market, a market that is transparent, efficient, dynamic, technology driven
where investors are protected, and commands trust and confidence of investors,” she said. Speaking on some of the specific efforts
being made to deepen the market and improve its liquidity, Ekineh said SEC had
cleared 10 market makers appointed by the Nigerian Stock Exchange, approved
rules for securities lending, and approval of new products.

“Apart from encouraging investors to patronize the
Collective Investment Schemes (CIS), the first
Exchange Traded Funds (ETF) had been registered and listed on the NSE. The
Commission has ensured the introduction of Custodian Services for CIS. We have
also commenced listing discussions with oil and gas companies and
telecommunications firms. SEC will also continue to collaborate with Bureau of
Public Enterprise on the listing of privatized and other prospective ones,” she said.

The commissioner added SEC was promoting the
take-off of Over-the-Counter (OTC) market and designing a framework for the
introductionof sukuk (Islamic
Bond). She told the foreign investors that the Commission would continue to
supportNSE’ initiatives towards strengthening
the market, adding thatefforts
were being made torestructure
and strengthen theAbuja
Securities and Commodity Exchange (ASCE) to deliver on its mandate. According
to her, the reconstitution of Capital Market Committee (CMC) Sub-committeeswas also meant tostrengthen the effectiveness of the
capital market.

These committees are: Investor Confidence; Fixed Income; Rules;
Fund Management; Technology and infrastructure; Commodities exchanges; Product
development and Advocacy group to interface with relevant institutions and
authorities in Nigeria with a view to addressing current challenges in the
market.

The amount of the United States dollar offered by the Central Bank
of Nigeria (CBN) at its regulated bi-weekly forex market increased by 27 per
cent to $1.370 billion in May, THISDAY findings have shown. Data compiled by
THISDAY, showed that the amount reflected an increase by $290 million, as
against a total of $1.080 billion offered by the apex bank at the official
market in April.

Just like the previous months, the CBN did not publish the amount
of dollar demanded by dealers throughout the eight auctions held in May. In the
month under review, THISDAY checks also revealed that out of the eight auctions
observed at the Wholesale Dutch Auction System (WDAS), while the apex bank
offered $150 million to dealers at four separate auctions, $200 million to
market participants twice, it offered $250 million once. It also offered $120
to the auction held on May 7.

The naira oscillated around the N155 to a dollar bank in May. The
highest value it attained in the month under review was the N155.69 to a dollar
it closed at five separate auctions in the month under review, while its lowest
value in the month was N155.75 to a dollar.

The relative stability observed at the forex market was attributed
to the gradual build-up of Nigeria’s
external reserves. The forex reserves maintained an upward trend throughout
last month as it gained a total of $961million to $37.668 billion as at May 31,
as against the $36.707 billion it was on May 2, THISDAY findings also showed.
FSDH Securities Limited had attributed the performance of the local currency to
the increase in the forex earnings as a result of rise in oil price and oil
output and reduced dollar demand from oil marketers.

The Diamond Bank of Nigeria Plc has instituted a winding up
petition against an Italian construction giant, Gitto Construzioni Generali
Nigeria Limited at the Federal High Court, Lagos over N4.2 billion unpaid debt.
The matter brought under the Companies and Allied Matters Act (CAMA) 2004 and
in the application for winding up pursuant to sections 408, 409 and 410 of the
CAMA Cap C. 20, laws of the Federal Republic of Nigeria is praying the court to
wound up the company because its unable to pay the bank the sum of N4, 226,
970.246.58 being a cumulative debt owed to them.

According to a 26 paragraph application brought by the counsel to
the petitioner, the bank said it first granted the firm an overdraft facility
and an invoice discounting facility totaling N650 million on October 25, 2004
in addition to a N1.0 billion revolving bonds/guarantee facility.

About eight months later, the bank
claimed that it gave another round of facilities to the company through an
offer later dated June 24, 2005. The offers include N48, 879,120.00 bank
guarantee facility, and N39, 103,296.00 vehicle lease facility increasing the
bonds/guarantee facilities to N4 billion.

The petitioner said, “the purpose for the above facilities were amongst others
to enable the respondent take immediate delivery of 13 units of Toyota vehicles
from Elizade Nigeria Limited pending payment and to accommodate the respondents
new request for bonds and guarantees for contracts awarded or being pursued by
the respondent.”

The banks disclosed that the
tenure of the facilities were 90 days for bank guarantees, 18 months for
vehicle leasehold while the bonds were to mature along with the respondents
existing N2.2 billion bonds and guarantee facility.

Diamond Bank insisted that in
January 9, 2006, it offered another round of facilities to the firm. They are a
N255, 249,000.00 lease-in-processes and a N255, 249, 00.00 lease finance
facility. “The facilities were
tenured for 90 days for the lease-in-process facility and 12 months for the
lease finance facility and were granted to enable the petitioner re-finance the
80 percent exposure under the crystallized lease-in-process facility and also
to establish a confirmed letter of credit on behalf of the respondent for the
importation of one unit of dredging equipment worth 2 million Euros”, it stated.

The petitioner also alleged that it granted additional facilities
in different sums of money to the respondent for different purposes on April
11, 2006, February 1, 2007, July 26, 2007 and March 25, 2010. According to the
bank, at the expiration of the facilities, the respondent failed to meet up to
its obligations as contained in the offer letters, prompting the bank to
forward several demand letters requesting the firm to pay up the debt to which
they have refused to comply with.